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BY WARREN BOROSON
NEWJERSEYNEWSROOM.COM
BOROSON ON MONEY
What are some of the worst mistakes investors make?
The first one named by Robert Mosera, first vice president-investments of Wells Fargo Advisors in Ridgewood, is inaction; refusal to pull the trigger – to do something clearly smart and useful.
"They don't do anything," he said of these frozen people, shaking his head. When he tells them about a no-brainer they could benefit from, they do nothing. "Maybe," he speculates, "they're waiting for something even better to come along."
Example: "These people have CDs paying maybe 2 percent. They could buy a municipal bond paying 4 percent, tax-free, and maturing in only four or five years. But they don't."
I've had the same experience. A woman I harangued to sell some of her Citigroup in December of last year, for a tax loss, simply didn't. Maybe she was depressed – depressed people may become passive. Maybe she was in shock, having lost so much money. Her dopey excuse for not selling was that she didn't know the stock's tax basis. (It was actually a cinch to figure out.)A similar mistake that Mosera has seen time and again: Investors' unwillingness to sell losers in taxable accounts. One woman he knows has a $7,000 loss in Alcatel-Lucent. She won't sell because she's afraid that the stock will zoom right after she's sold it. He told her she could buy the stock back 31 days after selling it – and still declare a tax loss. No luck.
Still another mistake Mosera has seen: People who are contradictory. They claim to be "conservative" investors, but stubbornly hold onto risky positions in bank stocks.
And then there was the fellow who decided to stay on the sidelines – until the stock market became less volatile.
"Well," Mosera told him, "the market is 8500 now. When do you think you might get back in?"
The fellow thought about it, then said, "When the market reaches 11,000."
In other words, after missing out on the stock market's 29 percent rise.
Mosera, 52, has an MBA in finance from Fairleigh Dickinson and has almost completed the requirements for a Certified Financial Planner. He buys either stocks or mutual funds for his clients. For stock portfolios, he charges 2 percent; for mutual funds, 1.5 percent.
"We do a lot of work for that," he says, noting that the work includes rebalancing. Rebalancing either at the end of the year, or after the markets have made a big move away from a client's preferred asset allocation (how much in stocks versus bonds).
"Rebalancing regularly," he points out, "is a way to own stocks and mitigate risk. Rebalancing forces you to buy low and sell high." Granted, selling winners and buying losers seems "counter-intuitive."
A client's psychology must be also considered, Mosera goes on. One client, 99 years old, insists on being 85 percent in stocks – including Boeing, which she's owned almost all her life. Then there is a 25-year-old client, an exceedingly cautious fellow, who insists on being entirely in CDs.
Mosera, who looks a bit like the actor John Malkovich, favors funds with excellent track records. Examples: the Royce funds, for small caps; the Davis family, for value; Cohen & Steers for real estate; PIMCo for bonds and commodities. He will use the splendid American funds for growth. (In the fee-based programs he manages, the sales charges are waived. And where there is an institutional share class available, his programs default to the lowest-cost shares.) He also favors Treasury Inflation Protected Securities, pointing out that while inflation is almost nonexistent now, in six months everything may have changed drastically.
But he doesn't tilt his stock choices toward value – stocks that seem cheap. That would have been catastrophic in recent years, he notes, what with the ranks of value stocks being swollen with so many financial stocks. He tends to buy underperformers – in 2009, that included small-cap stocks, emerging markets, and high-yield bonds.
What would he in general avoid? "Anything gimmicky." Like "structured products." And CDs with returns linked to the stock market. And "products du jour." (Someone once told me to beware of all new investments concocted by "the Dr. Frankensteins of finance.")
Does he use "stop losses"? (If a stock declines x percent, out it goes.) Yes, but
the particular percentage loss he sets for a stock depends on how volatile that stock has been. (Volatile stocks get more slack.)
What's his overall investment strategy? He asks his clients to explain their goals, then he develops an investment strategy to enable them to reach those goals. "I don't offer one set program for every client," he says. "Clients are unique and require unique attention. The only constant is the math used to determine how much risk to take."
In general, Mosera says, three things are important to him.
- God. A sense of humility. The feeling that he must try to get better and better every day. And remembering that you can't take it with you. (He mentions that someone has said, you never see a Brinks' truck in a funeral procession.)
- The client. Paying attention to his or her goals and objectives. And remembering to listen. "I tend to talk a lot," he says apologetically.
- Looking out for his own interests. For example, not doing anything that might get him into trouble – such as allowing one spouse to issue buy/sell orders for the other spouse. And spending too much time advising clients who never will move off the dime.
Mosera was born in Weehawken, then lived in Union City, then Maywood. He went to Hackensack High School, and worked for Prudential Securities and Salomon Smith Barney before coming to Wells Fargo. After buying Wachovia, Wells Fargo now has over 300 offices in New Jersey.
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I'll be teaching a beginner's course on investing at the County College of Morris in Randolph on Tuesday, Feb. 23, from 7 to 9 P.M. Cost: $30. To register, phone (973) 328-5183.
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You are invited to send financial questions to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
